May 16, 2023 • 25 mins
This podcast is an interview with Michael Horn, author, consultant and former co-director of the Clayton Christensen Institute. We discuss the recent Department of Education proposed changes to the definition of a Third-Party Servicer and new restrictions on revenue share agreements. Michael highlights the challenges to innovation that the Department's language might create and he gives his insights on how regulators could better balance innovation with consumer protections when drafting regulation.
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Eloy (00:10):
Hi, I'm Eloy Ortiz Oakley, and welcome back to the Ranch.
The podcast where we get behindthe curtain and break down the
people, the policies, and thepolitics of our higher education
system.
In this episode, we talk moreabout the recent changes that
the Department of Education hasproposed for its dear colleague
letter addressing revenue shareagreements, and the expanded
(00:34):
definition of a third partyservicer.
Today I'm joined by a veryspecial guest and good friend,
Michael Horn.
Michael is a well known authorthought leader, and is the
co-founder of the ClaytonChristensen Institute.
His latest book is titled FromReopen to Reinvent.
(00:54):
Welcome to the podcast, Michael.
Horn (00:57):
Eloy, thanks so much for having me.
Eloy (00:59):
All right, well it's great to have you.
It's great to be able to diveinto some of these topics,
particularly topics like thisthat are.
Fresh on the mind of many of ourcolleagues.
I've spent lots of time talkingto them about the recent
changes, what this means for forlearners, what this means for
consumer protection, what thismeans for innovation.
(01:21):
So let's talk a little bit aboutthat and before we dive into
some of those questions, Iwanna, I wanna ask you, you
know, you've spent much of yourcareer working for and
encouraging innovation ineducation.
And for our listeners who havebeen living under a rock,
haven't followed Michael Horn,tell us what you're working on
currently and what excites youabout innovation in higher
(01:44):
education.
Horn (01:46):
Yeah.
And I don't know if they'reliving under a rock or they just
have better things to do withtheir, with, with, with, with
their day-to-day jobs.
Right.
But a as you mentioned my, mynew book from Reopen to Reinvent
is out that's more focused onK-12 education really.
Trying to say, you know, thelearning loss and the
devastation from the pandemicwere just unimaginable for so
many families.
How do we take this and buildsomething better for them?
(02:08):
So I'm spending a lot of time onthe road around that, working on
a new book about helping peopleswitch jobs better so that they
don't regret their job switchesand that they can navigate their
careers better.
And then in terms of innovation,I mean, first I, I let, let me
just actually give a definitionof innovation, just cuz I think.
A lot of times people think it'slike you throw a bunch of stuff
(02:30):
at the wall, some of it's good,some of it's bad.
Who knows what sticks I in In mymind, it's not innovative unless
it's helping the individualsthat you're serving make
progress in their lives.
And so there's some bad stuffthat's out there that's new that
I wouldn't consider innovative.
And secondly and I think thisspeaks about higher education.
(02:52):
I think there's a whole bunch ofinnovation going on right now,
whether it's informal higher edor informal higher ed that is
seeking to expand access.
It's all relative.
You know, maybe someone had itbefore, but now you're doing it
at your institution and isreally focused more and more on
economic opportunity and, andEloy.
I think that's where, my, myfocus has always been, which is,
(03:14):
You know, if the problem is justgetting more people degrees, we
can actually just hit print and,and run a diploma mill.
But something really innovativeis getting people into good jobs
and then supporting them inthose pathways.
And, and that's, I I, I'm justthrilled that higher ed is
spending more time thinkingabout that right now.
That, that gets me excitedbecause I think presidents of
(03:35):
universities are, are, aresquarely focused on how do they
extend opportunity in a way thatmaybe they weren't 20 years ago.
Eloy (03:42):
That's right.
And, given the enormous amountof pressure that, that they get
from their boards, from theircommunities, from their own
students.
And I think one of the greatestthings that I've seen happen is,
Is the agency that learners havetoday.
You know, they're not justsitting back and saying, this is
the way we should consume highereducation.
(04:04):
They're actually pushing theirinstitutions to do more, to
think differently, andespecially post pandemic.
I mean, you know, they've gottena taste of what it means to be
hybrid, what it means to accesstechnology.
So I think, I think all of thesethings are pushing us in the, in
the right direction now.
You've had a chance to read theDepartment of Education's
(04:26):
proposed changes to thedefinition of third party
servicers and, and theconstraints that they would like
to put on online programmanagement companies, otherwise
known as OPMs, and alsoconstrained some of the revenue
share agreements that have beenout there.
And I know you, you've seen thelandscape.
How do these changes impact thekinds of disruptive innovations
(04:49):
that you believe?
Are necessary in highereducation and actually work
Horn (04:54):
Yeah, so let's start with a definition of disruptive
innovation and then dig into howthe regulation affects it.
And the only reason I do it iscuz as you know, disruption is
used to justify all sorts ofactions out there in the
ecosystem right now byentrepreneurs.
And most of them don'tunderstand it.
But, you know, disruption was avery specific theory coined by
Clay Christensen at the HarvardBusiness School.
(05:16):
And it basically said Incumbentsoften you know, have expensive,
very monolithic services thatserve consumers.
They tend to be unaffordable,centralized, and deeply
inaccessible and disruptiveinnovations come along and
introduce something that's moreaffordable, accessible, simple
(05:38):
to use and extends access tomany, many more people.
And, and the reason that'simportant, I think is cuz.
Typically the incumbents are notthe ones launching the
disruptions.
They're startup organizations.
And so if, when you look at thethird party servicers expanded
definition, and, and let's startthere.
Cause then I also think therevenue share in the OPM spaces
(05:59):
is a little bit different.
Essentially what the departmenthas done is said, any
organization.
That contracts in providing aTitle four program is now gonna
be subject to audits disclosureagreements and so forth.
Disclosure's.
Great.
But the audits, a, we're nottotally sure what it's gonna be,
(06:20):
and that creates a bit of abonanza for the accounting
firms.
But b for a startup organizationthat is trying to maybe give
more active learning pedagogy.
Right.
For a university or for anonprofit that doesn't have a
(06:40):
big budget but is working with auniversity or college, On
supporting first gen studentsthrough a Title four program,
all of a sudden they're gonna besubject to these regulations and
that's gonna stifle innovationthat I think we sorely need to
help get students two throughand then into a job.
And we know that frankly, a lotof these organizations may pass
(07:02):
those costs.
Onto the colleges.
And the colleges then are gonnapass those costs on to the
students, which means highertuition.
And so none of that excites me,and I think it favors, frankly,
the incumbents who have beenworking with universities and
colleges that'll be able toabsorb them these costs into
their balance sheets.
And frankly, We need, we needsome fresh thinking on how to
(07:25):
work with students.
We're not getting that greatresults.
So, so that's the high level, Ithink, in terms of the OPM and
Rev share, you, you asked aboutthat specifically.
You know, the department's askedfor comments and questions
obviously, and is still tryingto figure that out.
Obviously the OPMs get suckedinto the third party servicer
piece of this.
(07:45):
From my perspective, I think it,it's interesting, I actually
think disruptive innovation mayhave been solving this revenue
share challenge already in themarket as providers like Corra
and Noodle.
Were coming in with lower costalternative arrangements to
setting up these onlineprograms.
And so I, I kind of think like.
(08:06):
I don't know the, the major OPMsare still gonna need to make
their cost, so they'll justswitch to a fee for service
model that is still expensive.
I'm not sure that the departmentmuddling around in this way is
really attacking the problem wereally care about, which I think
is affordability and value andquality outcomes for students on
(08:26):
the back end.
Eloy (08:27):
right.
I, I think their, their maintarget is this issue of, of
consumer protection andpredatory practices.
In your experience especiallylooking at the landscape how
would you think about seatinginnovation while also ensuring
that there are some safeguardsin place for, for the learners
(08:50):
and also that, that there'stransparency in the marketplace.
So, If, if they're thinkingthey're signing up for
Institution X, but they'regetting, you know, through some
relationship institution y howdo you create a transparent
marketplace so that everyoneunderstands what they're getting
(09:11):
into and that there's, there'sguardrails in place.
You think that's a role for thefederal government, or you think
that's something that should besolved by the marketplace?
Horn (09:21):
I, I think it's absolutely a role for the federal
government because they're the,they're the key consumer in
terms of the money, and so theyought to be demanding more.
Of the colleges and universitiesthat they're financing to serve
students.
And in my mind, the market, it'sstill a market driven solution.
It's just that the market is, isthe government payer and so that
(09:41):
they need to be focused on theoutcomes.
Right.
And I, I'm super sympathetic tothe consumer protection
argument.
I, I look at the, the debt thatstudents incur, particularly if
they don't graduate and how itcripples them.
And I don't think we ought to behaving innovation that's just
about.
Enrollment, but it ought to betied to actual.
(10:03):
Graduation and labor forceoutcomes in my mind.
And that's where I would startat the department instead of
muddling with the inputs of howthe college puts it together,
which is really just gonna,frankly, reify the status quo,
but it's not changing theultimate consumer protection
incentives.
I, I'd love them to, you know,put in place similar to what
(10:25):
they started to do with gainfulemployment for the career
colleges and for-profits.
A, a much more expansive set ofthose sorts of things, focused
on the end outcomes, and thensay to the innovators, great, if
you can hit this bar, you cancome into the market.
But if you can't.
You're not welcome.
And so, and, and you can come upwith whatever creative
arrangements you want thatbetter serve students, but you
(10:48):
don't get access to thisotherwise.
And so that might be theinstitution's cosigning right
on, on the debt and having somerisk sharing as part of it.
It might be the institution'shaving a bar relative to other
programs like them that theyhave to clear.
I, I definitely think thegovernment has responsibility on
(11:09):
that.
And again, in my mind, it's notinnovation if we're not putting
some sort of quality or valuecontrols around these things.
Eloy (11:18):
I was in a conversation with Paul Leblanc, the president
of Southern New HampshireUniversity recently, and.
I, I think he feels verysimilar.
I think there, there is acertain amount of accountability
that the institutions need totake.
There's sort of a famous wellnow infamous example here in
Southern California of asouthern California university,
(11:39):
I won't name names, that
Horn (11:41):
You're being very politic.
You're being very political.
Eloy (11:45):
That, you know, created a situation where it, it's hard to
imagine how the students.
Who were in this graduateprogram paying the kind of
tuition that they had to paywould ever pay off that tuition
based on the earnings that theywould make post that graduate
program.
So I know the department isseeking to string together,
(12:09):
these expanded definition ofthird party service are, you
know, taking a look at revenueshare agreements.
They're also working on.
New gainful employment languageand talking about low value
programs.
It's a, it's a difficult basketto weave and, and make sense of
it all.
So I appreciate the departmenttaking time to, to listen to
(12:31):
folks in the field.
Now, y you know, your work fromyour early days at the Clayton
Christiansen Institute you tooka hard look and, and spent a lot
of time thinking aboutdisruptive innovation.
How, how, how do you seedisruptive innovation
(12:51):
influencing the direction ofhigher education today?
And, how should we think aboutseeding disruptive innovation
going forward?
Horn (13:01):
Well, I mean, first of all, you oversaw you know, what
may be a disruptive innovationin California in Cal Bright, I
believe was under your purview.
But you know, I, I think there'ssort of two forms of disruption
in higher ed.
One is of higher ed, if youwill, and so that's the, you
know, you mentioned our friendPaul Leblanc, Southern New
Hampshire University online.
Right.
And what they've done with thehybrid colleges and things of
(13:23):
that nature.
Low cost, extend access, right?
Western Governor's University.
Another terrific example of adisruptive innovation one of my
favorite is the quant school ofBusiness and Technology,
Eloy (13:35):
Huh.
Horn (13:36):
That is in incredibly low-cost.
Mba, active learning pedagogy rreally neat.
So that's disruption of, right?
And then there's disruptionwithin.
And so, you know, the coursera'sof the world that I think.
Charge significantly less than afull service online program
manager provider, or frankly, alot of colleges and universities
(13:56):
struggling to provide mentalhealth access and support for
their students right now.
New telehealth services comingin to be able to provide access
to tackle that non-consumptionin more affordable ways, or
peer-to-peer models for some ofthese, these things, you know,
those are the sorts ofdisruptive innovations that I
have in mind.
That are driving accessibilityof service, that are driving
(14:20):
affordability and, and, andagain to help the learners make
progress.
And again, when the federalgovernment is a payer, they're a
consumer as well, and, and ahealthy market.
The consumers are demandingquality.
They're not just giving freemoney for anything, you know,
Eloy, if it's okay, I'd, I'dactually love to hit at some of
my friends in the innovationcommunity because a lot of times
(14:45):
they, will say, well, we needroom to not be, you know,
encumbered by outcomes at thebeginning cuz we just need to
try a lot of stuff.
And I just, that's not true.
Like, you look at Appleintroducing the first iPhone or
the iPod.
Like they don't get to grow anddo that unless they introduce a
product to market that peoplewant to use and delivers value.
(15:06):
And we've created this weirdsystem in which, because of the,
what feels like free money tosome students, it, it's not on
the back half, but it feels likeit on the f on the front half.
We don't have that expectationsof quality.
And I, again, that's notinnovation in my, in my mind, we
need that innovation.
So that as these disruptionscome into market, really driving
(15:29):
value for the students andsociety.
Eloy (15:32):
Right.
And as we think about disruptiveinnovation and, and you know,
I've, I've heard from some, someof the same colleagues that,
that you speak to and they'reasking me, what, what is the
department thinking?
Horn (15:47):
Yeah, it's a great question and, and in my mind,
innovation and consumer preprotection occur when you free
people up to reimagine inputs.
So I would not regulate thethird party servicer and dotted
i's and t's across ts ofcontracts, but instead focus on
outcomes.
And I would focus on learneroutcomes.
(16:09):
And this is so that studentborrowers aren't taking out so
much debt that they can'tpossibly repay or that they're
going to a social work programwhere the salary bump is not
gonna justify a hundred thousandplus dollars in, in tuition.
Right.
That's absurd.
And so that's where I thinkdepartments should be focusing
is, is how do we.
(16:30):
Very clearly say, these are thesorts of outcomes we will pay
for and this is what we won'tpay for.
And, and frankly, look, I don'tthink h e a, the higher ed act
is gonna get reauthorized.
Uh, it would be wonderful.
But, but, but but I do thinkthat they should have some
conversations with Congressbecause I do think that there
(16:51):
are some grand bargainspotentially to be made right now
between Democrats andRepublicans.
On colleges sharing in the riskwhen student borrowers don't
repay what they borrow.
And I think that could be partof a solution, a system-wide
solution, so that colleges don'thave the incentive in the first
place to even enter into thesecontracts that are going to put
(17:14):
students in a really vulnerable,pretty awful place, longer run.
And then secondly so that theycreate the incentives in the
marketplace so that theseproviders can't even go to the
colleges and say, Hey, look,we'll help you set up this
program that's not gonna benefitstudents.
And so that, that's where I'drather the department really
(17:35):
spend its focus.
If, if you focus on outcomes,Then people will figure out ways
to get'em.
If you focus on inputs, you'rejust, you're moving deck chairs
around the Titanic, but you'renot changing the fundamental
game on, on, on, on whichcolleges are setting up these
programs and, and thefundamental incentives right now
at play.
And so that, that, that to meis.
(17:57):
Th that to me, I, that's where Iwould love the department to
spend their time, focus on thedebt equation, focus on the
value equation.
I would love to see the valueadded equation.
That's the last piece I guessI'd add, which is, you know,
there was a, as you know,there's been a bunch of bills
around the short term Pellprograms and Some of the
(18:18):
policies there and so forth,and, and Republicans I think
introduced a, a a bill thatwould say, you know, if you're
not making, we're gonna look atbasically the value add above
150% of the poverty line.
The better one would be lookingat the growth of salaries if you
didn't have the degree versus ifyou did, because I wanna see
that, that low income student,Or limited income student,
(18:40):
right, chooses to go and thengets a big boost in their
earnings relative to what theypaid.
That's what I really care about.
And so in my mind, policiesthat, that create more
incentives to focus on, onboosting that and not gaming the
Eloy (18:55):
Right
Horn (18:57):
would be where I want us to focus.
Eloy (18:59):
Especially as institutions themselves, whether it be online
institutions, on groundinstitutions make lots of
commitments to, to learners andtell'em talk to them about the
income boosts that they're goingto get from a particular
program.
We should make sure that thereis enough transparency behind
(19:19):
those claims.
Because that's, that's whereparticularly in Economies like
we have today.
There's lots of desperate peoplelooking for ways to get a better
foothold in the economy.
And we as, and I'll say theroyal, we as as a higher
education industry, make lots ofcommitments and, and say a lot
(19:42):
about our own value that wecreate.
So I think we should, we shouldhave to show that value.
Horn (19:50):
Hundred percent.
J just just quickly on thatEloy, and I know you probably
have a question, but just, youknow, one of the reasons I
started a nonprofit that JF F,jobs for the Future now operates
called the Education QualityOutcome Standards Board, was
that.
My sense is that institutionsought to have standards through
which they can represent the,the outcomes that they get for
(20:11):
students and any stand and anyoutcome that they say, you know,
in this laundry list ofstandards, that they say, well,
you know, we actually don'tthink this is something we add
value on.
You know, we're a liberal artscollege, and so we're not gonna
look at the boost in salary orsomething like that.
Fine.
But then you can't make.
Any marketing claims whatsoeverto prospective students about
(20:33):
that because you weren't willingto go and audit on those
outcomes when you got the chanceup front.
And, and so to me one,absolutely.
We ought to be looking at thoseoutcomes and, and only talking
about those that have beenaudited and verified.
And two, the federal governmentshould stop the financing of
programs that can't back it up,so they can't even talk about it
(20:55):
in the first place.
And, and that to me is really,you know, if they're paying for
it, let's pay for equality andvalue, not pay for stuff that
doesn't help students or, or dedilutes them into thinking that
there's a return here whenthey're, when they're.
Really isn't.
But again, focusing on the inputside of it, which is what the
department's done here with thethird party servicer.
(21:17):
I mean, can you imagine goingback to that Apple example, if
you know the regulators hadgotten together and said, this
is exactly how the componentshave to work and the
Eloy (21:27):
Mm-hmm.
Horn (21:28):
you have with the chips.
And would've just reifiedNokia's position in the market
and thank goodness they didn'tdo that, because then we'd still
be stuck with these bricks thatdid not much for us.
Eloy (21:39):
You mentioned gainful employment and the, the value
proposition.
And, you know, I'd love to, tohave you back on at some point
to have a, a broaderconversation about that,
especially once a department.
Comes out with their newlanguage around gainful
employment.
I think that's gonna be a reallygreat opportunity for all of us
to, to talk about value, becauseI think that's, that's, that's
(22:01):
the key.
The, the more information thatlearners have, the more
information and transparent thatthe marketplace is, I think the
better outcomes we'll see.
So I'm hopeful that this nextconversation as department will
spur, will be that, thatconversation about how, how do
we.
Create value for the learner.
Now let me let me turn to youwith, with a final question,
(22:25):
Michael, and, and I'd love to,to hear from you what your
latest endeavor is all about,your latest book.
Horn (22:34):
Yeah, so in, in From Reopen to Reinvent, my push is
really that we shouldn't just betrying to reopen schools as they
were, that frankly we're failingall too many kids, even before
the pandemic.
And we know the devastationsince the pandemic, but even
beforehand, the results were notsatisfactory, you know, and let,
let's just take K-12.
(22:57):
Eloy, you know before thepandemic, only a third of
students were proficient inmath.
And it's easy to say, well,that's a test.
You know, tests sort of reducedto the simplistic stuff, but
that meant fourth graders didn'tknow whether two eighths was
bigger, less than, or the sameas one half.
(23:17):
You need to know that andbecause we can't do the higher
order skills and things, anapplication that we really care
about out of education, unlessyou have some of those baseline
kids in this country weren'tlearning to read, we weren't
doing the science of readingwith them.
And so we need a system thatputs individuals at the center
(23:40):
of their learning andpersonalizes for them and makes
sure that they're makingprogress.
And so in the book, it's a realplea for mastery based learning
instead of seat time that weshouldn't be running students on
through concepts.
Embedding failure.
It's a plea for moving away froma zero sum education system to a
positive someone.
So it's not one where you win.
(24:01):
I lose And it's one in which Ithink we create a better web of
support for teachers as well inthis system.
I encourage team teaching as abig piece of this so that we're
not sticking teachers on islandsby themselves and saying, how
dare you miss a day of schoolbecause you're a kid at.
Home was sick, and therefore wecan't find a substitute for
(24:24):
these kids.
Like create more relationshipsfor kids and create a better web
of support for the teachers sothat they're not leaving any,
letting anyone down when theyhave to have more flexibility as
well.
Eloy (24:37):
Well, that sounds like perfect timing and hopefully we
have more of those conversationsinstead of some of the
ridiculous conversations we'rehaving now
Horn (24:44):
Amen.
Eloy (24:45):
well, listen, Michael, I really appreciate you taking the
time to, To join me.
This was a really funconversation, so thank you for
joining me on the rent.
Horn (24:56):
Hey, you bet.
Thanks El Eli.
Eloy (24:57):
All right, well, if you've enjoyed this episode, hit the
like button and leave me yourcomments to hear more episodes.
Subscribe to this channel orfollow us on your favorite
podcast platform.
We'll be back to you soon withmore timely topics and I look
forward to talking to you moreand getting into the ran.
So take care.
We'll see you soon.
Hi, I'm Eloy Ortiz Oakley, and welcome back to the Ranch.
The podcast where we get behindthe curtain and break down the
people, the policies, and thepolitics of our higher education
system.
In this episode, we talk moreabout the recent changes that
the Department of Education hasproposed for its dear colleague
letter addressing revenue shareagreements, and the expanded
(00:34):
definition of a third partyservicer.
Today I'm joined by a veryspecial guest and good friend,
Michael Horn.
Michael is a well known authorthought leader, and is the
co-founder of the ClaytonChristensen Institute.
His latest book is titled FromReopen to Reinvent.
(00:54):
Welcome to the podcast, Michael.
Horn (00:57):
Eloy, thanks so much for having me.
Eloy (00:59):
All right, well it's great to have you.
It's great to be able to diveinto some of these topics,
particularly topics like thisthat are.
Fresh on the mind of many of ourcolleagues.
I've spent lots of time talkingto them about the recent
changes, what this means for forlearners, what this means for
consumer protection, what thismeans for innovation.
(01:21):
So let's talk a little bit aboutthat and before we dive into
some of those questions, Iwanna, I wanna ask you, you
know, you've spent much of yourcareer working for and
encouraging innovation ineducation.
And for our listeners who havebeen living under a rock,
haven't followed Michael Horn,tell us what you're working on
currently and what excites youabout innovation in higher
(01:44):
education.
Horn (01:46):
Yeah.
And I don't know if they'reliving under a rock or they just
have better things to do withtheir, with, with, with, with
their day-to-day jobs.
Right.
But a as you mentioned my, mynew book from Reopen to Reinvent
is out that's more focused onK-12 education really.
Trying to say, you know, thelearning loss and the
devastation from the pandemicwere just unimaginable for so
many families.
How do we take this and buildsomething better for them?
(02:08):
So I'm spending a lot of time onthe road around that, working on
a new book about helping peopleswitch jobs better so that they
don't regret their job switchesand that they can navigate their
careers better.
And then in terms of innovation,I mean, first I, I let, let me
just actually give a definitionof innovation, just cuz I think.
A lot of times people think it'slike you throw a bunch of stuff
(02:30):
at the wall, some of it's good,some of it's bad.
Who knows what sticks I in In mymind, it's not innovative unless
it's helping the individualsthat you're serving make
progress in their lives.
And so there's some bad stuffthat's out there that's new that
I wouldn't consider innovative.
And secondly and I think thisspeaks about higher education.
(02:52):
I think there's a whole bunch ofinnovation going on right now,
whether it's informal higher edor informal higher ed that is
seeking to expand access.
It's all relative.
You know, maybe someone had itbefore, but now you're doing it
at your institution and isreally focused more and more on
economic opportunity and, andEloy.
I think that's where, my, myfocus has always been, which is,
(03:14):
You know, if the problem is justgetting more people degrees, we
can actually just hit print and,and run a diploma mill.
But something really innovativeis getting people into good jobs
and then supporting them inthose pathways.
And, and that's, I I, I'm justthrilled that higher ed is
spending more time thinkingabout that right now.
That, that gets me excitedbecause I think presidents of
(03:35):
universities are, are, aresquarely focused on how do they
extend opportunity in a way thatmaybe they weren't 20 years ago.
Eloy (03:42):
That's right.
And, given the enormous amountof pressure that, that they get
from their boards, from theircommunities, from their own
students.
And I think one of the greatestthings that I've seen happen is,
Is the agency that learners havetoday.
You know, they're not justsitting back and saying, this is
the way we should consume highereducation.
(04:04):
They're actually pushing theirinstitutions to do more, to
think differently, andespecially post pandemic.
I mean, you know, they've gottena taste of what it means to be
hybrid, what it means to accesstechnology.
So I think, I think all of thesethings are pushing us in the, in
the right direction now.
You've had a chance to read theDepartment of Education's
(04:26):
proposed changes to thedefinition of third party
servicers and, and theconstraints that they would like
to put on online programmanagement companies, otherwise
known as OPMs, and alsoconstrained some of the revenue
share agreements that have beenout there.
And I know you, you've seen thelandscape.
How do these changes impact thekinds of disruptive innovations
(04:49):
that you believe?
Are necessary in highereducation and actually work
Horn (04:54):
Yeah, so let's start with a definition of disruptive
innovation and then dig into howthe regulation affects it.
And the only reason I do it iscuz as you know, disruption is
used to justify all sorts ofactions out there in the
ecosystem right now byentrepreneurs.
And most of them don'tunderstand it.
But, you know, disruption was avery specific theory coined by
Clay Christensen at the HarvardBusiness School.
(05:16):
And it basically said Incumbentsoften you know, have expensive,
very monolithic services thatserve consumers.
They tend to be unaffordable,centralized, and deeply
inaccessible and disruptiveinnovations come along and
introduce something that's moreaffordable, accessible, simple
(05:38):
to use and extends access tomany, many more people.
And, and the reason that'simportant, I think is cuz.
Typically the incumbents are notthe ones launching the
disruptions.
They're startup organizations.
And so if, when you look at thethird party servicers expanded
definition, and, and let's startthere.
Cause then I also think therevenue share in the OPM spaces
(05:59):
is a little bit different.
Essentially what the departmenthas done is said, any
organization.
That contracts in providing aTitle four program is now gonna
be subject to audits disclosureagreements and so forth.
Disclosure's.
Great.
But the audits, a, we're nottotally sure what it's gonna be,
(06:20):
and that creates a bit of abonanza for the accounting
firms.
But b for a startup organizationthat is trying to maybe give
more active learning pedagogy.
Right.
For a university or for anonprofit that doesn't have a
(06:40):
big budget but is working with auniversity or college, On
supporting first gen studentsthrough a Title four program,
all of a sudden they're gonna besubject to these regulations and
that's gonna stifle innovationthat I think we sorely need to
help get students two throughand then into a job.
And we know that frankly, a lotof these organizations may pass
(07:02):
those costs.
Onto the colleges.
And the colleges then are gonnapass those costs on to the
students, which means highertuition.
And so none of that excites me,and I think it favors, frankly,
the incumbents who have beenworking with universities and
colleges that'll be able toabsorb them these costs into
their balance sheets.
And frankly, We need, we needsome fresh thinking on how to
(07:25):
work with students.
We're not getting that greatresults.
So, so that's the high level, Ithink, in terms of the OPM and
Rev share, you, you asked aboutthat specifically.
You know, the department's askedfor comments and questions
obviously, and is still tryingto figure that out.
Obviously the OPMs get suckedinto the third party servicer
piece of this.
(07:45):
From my perspective, I think it,it's interesting, I actually
think disruptive innovation mayhave been solving this revenue
share challenge already in themarket as providers like Corra
and Noodle.
Were coming in with lower costalternative arrangements to
setting up these onlineprograms.
And so I, I kind of think like.
(08:06):
I don't know the, the major OPMsare still gonna need to make
their cost, so they'll justswitch to a fee for service
model that is still expensive.
I'm not sure that the departmentmuddling around in this way is
really attacking the problem wereally care about, which I think
is affordability and value andquality outcomes for students on
(08:26):
the back end.
Eloy (08:27):
right.
I, I think their, their maintarget is this issue of, of
consumer protection andpredatory practices.
In your experience especiallylooking at the landscape how
would you think about seatinginnovation while also ensuring
that there are some safeguardsin place for, for the learners
(08:50):
and also that, that there'stransparency in the marketplace.
So, If, if they're thinkingthey're signing up for
Institution X, but they'regetting, you know, through some
relationship institution y howdo you create a transparent
marketplace so that everyoneunderstands what they're getting
(09:11):
into and that there's, there'sguardrails in place.
You think that's a role for thefederal government, or you think
that's something that should besolved by the marketplace?
Horn (09:21):
I, I think it's absolutely a role for the federal
government because they're the,they're the key consumer in
terms of the money, and so theyought to be demanding more.
Of the colleges and universitiesthat they're financing to serve
students.
And in my mind, the market, it'sstill a market driven solution.
It's just that the market is, isthe government payer and so that
(09:41):
they need to be focused on theoutcomes.
Right.
And I, I'm super sympathetic tothe consumer protection
argument.
I, I look at the, the debt thatstudents incur, particularly if
they don't graduate and how itcripples them.
And I don't think we ought to behaving innovation that's just
about.
Enrollment, but it ought to betied to actual.
(10:03):
Graduation and labor forceoutcomes in my mind.
And that's where I would startat the department instead of
muddling with the inputs of howthe college puts it together,
which is really just gonna,frankly, reify the status quo,
but it's not changing theultimate consumer protection
incentives.
I, I'd love them to, you know,put in place similar to what
(10:25):
they started to do with gainfulemployment for the career
colleges and for-profits.
A, a much more expansive set ofthose sorts of things, focused
on the end outcomes, and thensay to the innovators, great, if
you can hit this bar, you cancome into the market.
But if you can't.
You're not welcome.
And so, and, and you can come upwith whatever creative
arrangements you want thatbetter serve students, but you
(10:48):
don't get access to thisotherwise.
And so that might be theinstitution's cosigning right
on, on the debt and having somerisk sharing as part of it.
It might be the institution'shaving a bar relative to other
programs like them that theyhave to clear.
I, I definitely think thegovernment has responsibility on
(11:09):
that.
And again, in my mind, it's notinnovation if we're not putting
some sort of quality or valuecontrols around these things.
Eloy (11:18):
I was in a conversation with Paul Leblanc, the president
of Southern New HampshireUniversity recently, and.
I, I think he feels verysimilar.
I think there, there is acertain amount of accountability
that the institutions need totake.
There's sort of a famous wellnow infamous example here in
Southern California of asouthern California university,
(11:39):
I won't name names, that
Horn (11:41):
You're being very politic.
You're being very political.
Eloy (11:45):
That, you know, created a situation where it, it's hard to
imagine how the students.
Who were in this graduateprogram paying the kind of
tuition that they had to paywould ever pay off that tuition
based on the earnings that theywould make post that graduate
program.
So I know the department isseeking to string together,
(12:09):
these expanded definition ofthird party service are, you
know, taking a look at revenueshare agreements.
They're also working on.
New gainful employment languageand talking about low value
programs.
It's a, it's a difficult basketto weave and, and make sense of
it all.
So I appreciate the departmenttaking time to, to listen to
(12:31):
folks in the field.
Now, y you know, your work fromyour early days at the Clayton
Christiansen Institute you tooka hard look and, and spent a lot
of time thinking aboutdisruptive innovation.
How, how, how do you seedisruptive innovation
(12:51):
influencing the direction ofhigher education today?
And, how should we think aboutseeding disruptive innovation
going forward?
Horn (13:01):
Well, I mean, first of all, you oversaw you know, what
may be a disruptive innovationin California in Cal Bright, I
believe was under your purview.
But you know, I, I think there'ssort of two forms of disruption
in higher ed.
One is of higher ed, if youwill, and so that's the, you
know, you mentioned our friendPaul Leblanc, Southern New
Hampshire University online.
Right.
And what they've done with thehybrid colleges and things of
(13:23):
that nature.
Low cost, extend access, right?
Western Governor's University.
Another terrific example of adisruptive innovation one of my
favorite is the quant school ofBusiness and Technology,
Eloy (13:35):
Huh.
Horn (13:36):
That is in incredibly low-cost.
Mba, active learning pedagogy rreally neat.
So that's disruption of, right?
And then there's disruptionwithin.
And so, you know, the coursera'sof the world that I think.
Charge significantly less than afull service online program
manager provider, or frankly, alot of colleges and universities
(13:56):
struggling to provide mentalhealth access and support for
their students right now.
New telehealth services comingin to be able to provide access
to tackle that non-consumptionin more affordable ways, or
peer-to-peer models for some ofthese, these things, you know,
those are the sorts ofdisruptive innovations that I
have in mind.
That are driving accessibilityof service, that are driving
(14:20):
affordability and, and, andagain to help the learners make
progress.
And again, when the federalgovernment is a payer, they're a
consumer as well, and, and ahealthy market.
The consumers are demandingquality.
They're not just giving freemoney for anything, you know,
Eloy, if it's okay, I'd, I'dactually love to hit at some of
my friends in the innovationcommunity because a lot of times
(14:45):
they, will say, well, we needroom to not be, you know,
encumbered by outcomes at thebeginning cuz we just need to
try a lot of stuff.
And I just, that's not true.
Like, you look at Appleintroducing the first iPhone or
the iPod.
Like they don't get to grow anddo that unless they introduce a
product to market that peoplewant to use and delivers value.
(15:06):
And we've created this weirdsystem in which, because of the,
what feels like free money tosome students, it, it's not on
the back half, but it feels likeit on the f on the front half.
We don't have that expectationsof quality.
And I, again, that's notinnovation in my, in my mind, we
need that innovation.
So that as these disruptionscome into market, really driving
(15:29):
value for the students andsociety.
Eloy (15:32):
Right.
And as we think about disruptiveinnovation and, and you know,
I've, I've heard from some, someof the same colleagues that,
that you speak to and they'reasking me, what, what is the
department thinking?
Horn (15:47):
Yeah, it's a great question and, and in my mind,
innovation and consumer preprotection occur when you free
people up to reimagine inputs.
So I would not regulate thethird party servicer and dotted
i's and t's across ts ofcontracts, but instead focus on
outcomes.
And I would focus on learneroutcomes.
(16:09):
And this is so that studentborrowers aren't taking out so
much debt that they can'tpossibly repay or that they're
going to a social work programwhere the salary bump is not
gonna justify a hundred thousandplus dollars in, in tuition.
Right.
That's absurd.
And so that's where I thinkdepartments should be focusing
is, is how do we.
(16:30):
Very clearly say, these are thesorts of outcomes we will pay
for and this is what we won'tpay for.
And, and frankly, look, I don'tthink h e a, the higher ed act
is gonna get reauthorized.
Uh, it would be wonderful.
But, but, but but I do thinkthat they should have some
conversations with Congressbecause I do think that there
(16:51):
are some grand bargainspotentially to be made right now
between Democrats andRepublicans.
On colleges sharing in the riskwhen student borrowers don't
repay what they borrow.
And I think that could be partof a solution, a system-wide
solution, so that colleges don'thave the incentive in the first
place to even enter into thesecontracts that are going to put
(17:14):
students in a really vulnerable,pretty awful place, longer run.
And then secondly so that theycreate the incentives in the
marketplace so that theseproviders can't even go to the
colleges and say, Hey, look,we'll help you set up this
program that's not gonna benefitstudents.
And so that, that's where I'drather the department really
(17:35):
spend its focus.
If, if you focus on outcomes,Then people will figure out ways
to get'em.
If you focus on inputs, you'rejust, you're moving deck chairs
around the Titanic, but you'renot changing the fundamental
game on, on, on, on whichcolleges are setting up these
programs and, and thefundamental incentives right now
at play.
And so that, that, that to meis.
(17:57):
Th that to me, I, that's where Iwould love the department to
spend their time, focus on thedebt equation, focus on the
value equation.
I would love to see the valueadded equation.
That's the last piece I guessI'd add, which is, you know,
there was a, as you know,there's been a bunch of bills
around the short term Pellprograms and Some of the
(18:18):
policies there and so forth,and, and Republicans I think
introduced a, a a bill thatwould say, you know, if you're
not making, we're gonna look atbasically the value add above
150% of the poverty line.
The better one would be lookingat the growth of salaries if you
didn't have the degree versus ifyou did, because I wanna see
that, that low income student,Or limited income student,
(18:40):
right, chooses to go and thengets a big boost in their
earnings relative to what theypaid.
That's what I really care about.
And so in my mind, policiesthat, that create more
incentives to focus on, onboosting that and not gaming the
Eloy (18:55):
Right
Horn (18:57):
would be where I want us to focus.
Eloy (18:59):
Especially as institutions themselves, whether it be online
institutions, on groundinstitutions make lots of
commitments to, to learners andtell'em talk to them about the
income boosts that they're goingto get from a particular
program.
We should make sure that thereis enough transparency behind
(19:19):
those claims.
Because that's, that's whereparticularly in Economies like
we have today.
There's lots of desperate peoplelooking for ways to get a better
foothold in the economy.
And we as, and I'll say theroyal, we as as a higher
education industry, make lots ofcommitments and, and say a lot
(19:42):
about our own value that wecreate.
So I think we should, we shouldhave to show that value.
Horn (19:50):
Hundred percent.
J just just quickly on thatEloy, and I know you probably
have a question, but just, youknow, one of the reasons I
started a nonprofit that JF F,jobs for the Future now operates
called the Education QualityOutcome Standards Board, was
that.
My sense is that institutionsought to have standards through
which they can represent the,the outcomes that they get for
(20:11):
students and any stand and anyoutcome that they say, you know,
in this laundry list ofstandards, that they say, well,
you know, we actually don'tthink this is something we add
value on.
You know, we're a liberal artscollege, and so we're not gonna
look at the boost in salary orsomething like that.
Fine.
But then you can't make.
Any marketing claims whatsoeverto prospective students about
(20:33):
that because you weren't willingto go and audit on those
outcomes when you got the chanceup front.
And, and so to me one,absolutely.
We ought to be looking at thoseoutcomes and, and only talking
about those that have beenaudited and verified.
And two, the federal governmentshould stop the financing of
programs that can't back it up,so they can't even talk about it
(20:55):
in the first place.
And, and that to me is really,you know, if they're paying for
it, let's pay for equality andvalue, not pay for stuff that
doesn't help students or, or dedilutes them into thinking that
there's a return here whenthey're, when they're.
Really isn't.
But again, focusing on the inputside of it, which is what the
department's done here with thethird party servicer.
(21:17):
I mean, can you imagine goingback to that Apple example, if
you know the regulators hadgotten together and said, this
is exactly how the componentshave to work and the
Eloy (21:27):
Mm-hmm.
Horn (21:28):
you have with the chips.
And would've just reifiedNokia's position in the market
and thank goodness they didn'tdo that, because then we'd still
be stuck with these bricks thatdid not much for us.
Eloy (21:39):
You mentioned gainful employment and the, the value
proposition.
And, you know, I'd love to, tohave you back on at some point
to have a, a broaderconversation about that,
especially once a department.
Comes out with their newlanguage around gainful
employment.
I think that's gonna be a reallygreat opportunity for all of us
to, to talk about value, becauseI think that's, that's, that's
(22:01):
the key.
The, the more information thatlearners have, the more
information and transparent thatthe marketplace is, I think the
better outcomes we'll see.
So I'm hopeful that this nextconversation as department will
spur, will be that, thatconversation about how, how do
we.
Create value for the learner.
Now let me let me turn to youwith, with a final question,
(22:25):
Michael, and, and I'd love to,to hear from you what your
latest endeavor is all about,your latest book.
Horn (22:34):
Yeah, so in, in From Reopen to Reinvent, my push is
really that we shouldn't just betrying to reopen schools as they
were, that frankly we're failingall too many kids, even before
the pandemic.
And we know the devastationsince the pandemic, but even
beforehand, the results were notsatisfactory, you know, and let,
let's just take K-12.
(22:57):
Eloy, you know before thepandemic, only a third of
students were proficient inmath.
And it's easy to say, well,that's a test.
You know, tests sort of reducedto the simplistic stuff, but
that meant fourth graders didn'tknow whether two eighths was
bigger, less than, or the sameas one half.
(23:17):
You need to know that andbecause we can't do the higher
order skills and things, anapplication that we really care
about out of education, unlessyou have some of those baseline
kids in this country weren'tlearning to read, we weren't
doing the science of readingwith them.
And so we need a system thatputs individuals at the center
(23:40):
of their learning andpersonalizes for them and makes
sure that they're makingprogress.
And so in the book, it's a realplea for mastery based learning
instead of seat time that weshouldn't be running students on
through concepts.
Embedding failure.
It's a plea for moving away froma zero sum education system to a
positive someone.
So it's not one where you win.
(24:01):
I lose And it's one in which Ithink we create a better web of
support for teachers as well inthis system.
I encourage team teaching as abig piece of this so that we're
not sticking teachers on islandsby themselves and saying, how
dare you miss a day of schoolbecause you're a kid at.
Home was sick, and therefore wecan't find a substitute for
(24:24):
these kids.
Like create more relationshipsfor kids and create a better web
of support for the teachers sothat they're not leaving any,
letting anyone down when theyhave to have more flexibility as
well.
Eloy (24:37):
Well, that sounds like perfect timing and hopefully we
have more of those conversationsinstead of some of the
ridiculous conversations we'rehaving now
Horn (24:44):
Amen.
Eloy (24:45):
well, listen, Michael, I really appreciate you taking the
time to, To join me.
This was a really funconversation, so thank you for
joining me on the rent.
Horn (24:56):
Hey, you bet.
Thanks El Eli.
Eloy (24:57):
All right, well, if you've enjoyed this episode, hit the
like button and leave me yourcomments to hear more episodes.
Subscribe to this channel orfollow us on your favorite
podcast platform.
We'll be back to you soon withmore timely topics and I look
forward to talking to you moreand getting into the ran.
So take care.
We'll see you soon.
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